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By Paul Oboohov Assistant federal treasurer George Gear puts the government's line on national competition policy: it's about cutting business costs and creating a competitive and consumer-driven culture and would increase productivity leading to economic growth and more jobs. Gear insists he's not into "slash and burn" or wholesale privatisation. Some services will remain within the public sector, he assures us. The government had negotiated with unions to preserve the public interest, public sector neutrality and community service obligations principles in an agreement. However, John Buchanan, deputy director of the Australian Centre for Industrial Relations Research and Teaching, says that Fred Hilmer, the author of the national competition policy, admitted that economic growth could not be guaranteed by privatisation of the public sector. Hilmer also conceded that classical economic theory was weak on competition. However, he insisted that the "free market" did the best job. Gear and Buchanan were speakers at an October 20 forum organised by the Community and Public Sector Union in Canberra. While Hilmer produced no evidence of the policy's public good, there is evidence of a 5% loss in GDP to the economy as a result of the banks' lending binge after financial deregulation in the 1980s. Financial deregulation was supposed to enhance competition and lower costs but ordinary people are still paying for this disaster through higher interest rates on mortgages. Economist John Quiggin thoroughly analysed Hilmer's report, "tracking down every assumption and quote", according to Buchanan. Quiggin found that Hilmer quoted an Industries Commission study claiming the possibility of 5.4% lower prices through introducing "world best practice" in the Australian electricity supply industry. This turned out to be based on a study of a single hydro-electric plant in Canada supplying just two customers. Hilmer quoted the cost benefits of water privatisation in Britain but did not mention its disastrous health consequences. The few serious evaluations done on "contracting out" of public services have shown that it often actually adds administrative costs of monitoring the contracts over and above the original in-house cost. Several private firms underbidding the public sector in the first round of contracting out have since gone bust and the quality of service was lower in most cases. Another of Hilmer's dubious arguments is that workers retrenched through privatisation will be re-employed in the private sector. However, unemployment has been rising higher after each of the last three recessions, casting doubt on this pious hope. While Buchanan criticised union leaderships ("they're brain dead") for accepting the national competition policy he does not offer a new strategy for the union movement. In the short term, he said, unionists have to fight for public service providers to be regarded on a case-by-case basis under competition policy. In the longer term, unionists should demand regulatory bodies, independent of industry and government bureaucracies but including members from both and consumer advocates. Buchanan urged unionists to aim at "the European model of efficiency through fairness" rather than the "Japanese model of efficiency through sweated labour". Workers should help capital lower risk and uncertainty in return for "fairness". But Buchanan's "efficiency and fairness" principle is easily subverted by economic rationalists. To big business, the only fair thing is to get control of profitable services currently publicly owned. Buchanan's solution comes straight out of the ACTU-endorsed Australia Reconstructed, a report drawn up in 1987 by a group of union and government bureaucrats after a study tour of Austria, Sweden and Norway. They idealised a model of cooperation between capitalist and workers, supposedly for their common gain. However, the real effect of such a social pact in Australia was to implement a historic shift from wages to profits in the 1980s and 1990s. Union militants won't find much useful in a rehash of this corporatist fantasy.